Sunday, October 14, 2007 - Collections Still Wanting

I've been charting Prosper's collections statistics ever since Prosper first made them avaiable. Prosper sends loans to a collection agency when they are 1 month late, and the outcome after the collection agency's efforts are charted below.

The big picture is that Prosper's collection results continue to be scandalously bad. Of those loans that go 1 month late, Prosper's data shows that 13.5% of the loans are cured, from which we can estimate that a horrible 86.5% go on to default. (We are forced to estimate, because these stats include loans still in process. However, as you can see from the breakdown, almost nothing is ever collected after the first month, so the estimate is pretty close.) Here's the data for Penncro, the collection agency handling most of Prosper's loans...

Penncro collections chart


The data for this chart comes from Prosper's Collection Agency Web Page. I have shown data only for Penncro. Although Prosper has two collection agencies, almost all late loans have gone to Penncro. The other agency, FirstSource, is doing even worse.

I've hidden the red "net collected" curve prior to 7/4/07, because the data prosper provided for that period was obviously wrong. Older versions of this chart and related discussions can be found in the collections thread on the prosper forum.

A more complete discussion of Prosper's collections can be found in my blog entry from May, "Open letter #2 - Collections is broken".

A couple of weeks ago, Shira Levine published an interview with Doug Fuller, the new fellow in charge of Prosper collections. At one point, Doug was talking about his success improving collections at a prior job, and Shira asked...

Q: Can you do the same thing with Prosper’s collections calls?

A: Actually, for the month of September, we’ve seen greater than a 40% increase in the contact rates at our primary collection agency

Wow! 40% improvement! Sounds great, but looking at the collections rates in the chart, I don't see a corresponding improvement in September. How can it be that a 40% improvement in contact rates produces no results in collections?

One way this could happen is if the contact rates were so small to begin with that a 40% increase is insignificant. Prosper has never published "contact rates", so we don't know how big a 40% increase is. If you were only contacting 5 people before, and you added 2, that would be a 40% increase, but the additional 2 contacts wouldn't affect the overal status of the 1148 loans in collections by much.

To Doug's credit, he has been the first Prosper employee to state publicly that collections has been mismanaged. That's a start. Now lets see some action.